Wednesday, October 10, 2012

Miracle in Iceland

Iceland has a population of
some 300,000 people. In 2008 it suffered the same problems
experienced by our country, by Greece, by Italy, by Spain, only
worse– people and banks had borrowed a great deal of money on the
strength of a housing bubble. When the bubble burst the banks went
broke and ordinary people lost their homes and their jobs.

What we did, what the Greek
government is doing under pressure from the European Union, is to
bail out the banks and make the people pay for it. This is known as
an "austerity program" which cuts social programs and cuts
wages, while banks recover and make more money than ever.

As a result the population is
impoverished, business declines, more people are out of work and thus
there is less and less money to spend – which is very bad for
business. Unemployment in Greece is close to 25%. It is still 8% in
our country. Our economy is not recovering at all, or only very
slowly.

Iceland, by contrast, is doing
well. Their national product is not quite what it was before the
crisis but it is growing every year. They are doing better than the
rest of Europe. They're doing better than we are.

They chose the opposite policy
from the United States and the European Union. They let the banks go
broke and maintained social programs and wages. The ordinary people
had money to spend and that was one of the factors that helped the
economy recover. Now they are thriving.

What is more, the Icelanders
jailed the bankers who ruined the economy in the first place. In the
US, the US attorney in New York yesterday filed the first criminal
case against one of the banks who are responsible for the current
crisis, J.P. Morgan. They are working on some other cases, but my
bet is that no one will go to jail.

Americans like to quote
Lincoln's phrase from the Gettysburg address about "the
government of, for and by the people." But our government
is not for the people; it is for the banks. The Icelandic government
is for the people and they find that to be a good policy.